tv Nightly Business Report PBS January 21, 2016 6:30pm-7:01pm PST
♪ >> announcer: this is "nightly business report," with tyler mathisen and sue herera. blue chip blues. american express and boeing both say business isn't shaping up the way they thought it would. >> markets rally, but do the gains have staying power? why there are reasons to be wary of today's surge after the purge. blank canvas. meet the artist who's creating art out of her investments. all that and more tonight on "nightly business report" for thursday january 21s good evening, everyone, and welcome. stocks rallied as oil posted one of its biggest gains in months. but we begin tonight with earnings. late earnings news that could set the tone for trading tomorrow. boeing and american express, two blue chips, both say 2016 is not
shaping up the way they thought it would. first, american express, the company cut its guidance for this year and next, citing a tough operating environment. but in its earnings release amex did beat analysts' estimates with earnings of 1.23 a share. revenues also slightly better than expectations. though they were lower, as you see there, than a year ago. as for shares of amex, they dropped on the warning. our mary thompson has more on amex's soggy report. >> reporter: it's been a while since the payments giant hit its long-term goal of revenue growth of 8% to 10%. and the last quarter was no different. as revenue declined, though to better than expected levels. for some time wall street's waited for the company to reset its outlook because of this and it did so today, citing the lack of growth in revenue in what the firm called a market marked by intense competition, a shift in the economics of the co-branded card business and a changing regulatory environment. to combat this it's cutting a billion dollars in costs by 2017
and adjusting its earnings outlook. amex forecasting profits this year that bracket analysts' estimates but include what it says will be a substantial gain from the sale of its costco co-branded loan portfolio. its forecast for 2017 earnings of 5.50 a share, 49 cents shy of wall street's forecast. for "nightly business report" i'm mary thompson. and now to boeing. the company says it will take a charge in the fourth quarter and it will scale back production of its 747 plane. boeing says weak air freight demand drove that decision but the plane maker stressed it does not see weakness in air passenger travel. that pressured shares initially in after-hours trading. and now to today's rally and the reprieve, i should say, from the rout. what carried equities higher was the same thing that's been bringing them lower. oil prices. they posted their biggest percentage gain in months. add to the mix comments from a very powerful central banker and you have a recipe for rising
stocks. the dow jones industrial average gained 115 points to finish at 15,882. nasdaq rose just fractionally. the s&p 500 added 9. as for oil, it settled up more than 4%, getting close to 30 bucks a barrel. but even though stocks rallied bob pisani explains why there may be little reason for celebration. >> reporter: we rallied today but it was a crummy unenthusiastic rally. really we should have done better. first mario draghi, head of the european central bank says down side risks had increased. he was worried about the lack of any inflation and he implied there was more stimulus coming. it was widely believed some of these comments were directed at the federal reserve, a veiled request for them to sort of back off on this perception that they're going to be on an aggressive path to hike rates. what actually happened? our markets opened up and they immediately sold right into it. that's not good. the only thing that saved us from a humiliating plunge right after the open was oil, which
staged a dramatic turnaround right after the u.s. open and it took the whole market up with it. but here's the worrisome part. the second oil stopped rallying around noon the market stopped going up and began to gently roll over. and for the rest of the afternoon mostly the markets meandered around in a very narrow trading range. now, this after 40% of the stocks listed on the new york stock exchange were at 52-week lows and after one of the worst januarys ever, this is all we can really do? boy, this is one tough, nasty, skeptical market. for "nightly business report" i'm bob pisani at the new york stock exchange. and while the markets have been closely following oil and china, as we mentioned, today they were also listening to central bankers. those comments from european central bank president mario draghi lifted the equity markets early on after hinting that more economic stimulus may be necessary as growth falters and down side risks increase. >> in this environment euro area
inflation dynamics also continue to be weaker than expected. it will therefore be necessary to review and possibly reconsider our monetary policy stance at our next meeting in early march. >> mr. draghi also made it clear there will be no limits on his ability to reflate the euro zone. al blinder joins us now to talk a little more about the central banks and why they may matter to investors even more than usual over the next few weeks. he's former vice chairman of the board of governors of the fed, now professor of economics and public affairs at princeton. we welcome him back. professor blinder, always great to see you. did you interpret anything in what mr. draghi said as, a, putting any pressure on our fed to take a more sort of dovish tone with respect to interest rates or do you think anything he said would change in any way
the statement that the fed will make after it meets next week? >> i'd say neither of those. if mario draghi wants to suggest to janet yellen that she be easier or tighter, for that matter, but different, he'll pick up the phone and call her. that itself would be a very rare event. for him to speak to her through the media, it's an absurd thought. that was not aimed at the federal reserve. i think what it was, it was an echo in a small way of his famous and incredibly successful "whatever it takes" statement of 2012. he's trying to talk up the market. >> so professor, what do you expect, then, from ms. yellen when she next makes her comments? do you expect her to reference the market volatility? do you expect her to try to reassure the markets? >> i would say no, unless solidity reassures the market. i expect that when the statement
comes out next week, unless something -- you know, who knows what might happen next week, but if nothing wild happens i expect a statement from the fomc to look a lot like the previous one, a kind of a status quo statement. she is no doubt scratching her head about what's going on, wondering if the fed should adjust its policy. but it's way, way too early to say anything like that publicly. so i don't think she will. >> let's turn away a little bit from the fed and toward the economy more broadly. today's unemployment claims were higher than i think a lot of people expected. yesterday inflation news basically zero inflation. and earlier this week china's slowing. are you concerned about the pace of growth in the u.s. economy? does this look like a good or a healthy economy to you? >> it looks like a mediocre economy, which unfortunately is what it's been looking like for a while. and probably in the fourth
quarter worse than mediocre. a number of things such as inventory are conspiring to probably bring the fourth quarter lower than what's been the average over the last several years, 2, 2 1/4%. that's good but it's not great. certainly compared to europe it's looking terrific. but among the things you mentioned, china's a little bit of a worry. but i wouldn't make a major worry unless china does a lot ors than it appears. >> should the fed move again on interest rates given -- >> in january? no. >> or in march. >> you know, i think the books are still open on march. and there's a long time between now and march. especially since one of the major things that's got people worried is the stock market. and as you both know, the stock market can zoom up and shoot down on short notice and frequently does. >> alan, we hope we'll see you
many times between now and march. hope so. alan blinder with princeton university. >> thank you. tyler just mentioned that surprising report on the labor market suggests layoffs may have increased recently. the number of workers filing applications for unemployment benefits rose by 10,000 to a seasonally adjusted 293,000. that is the highest level in six months. claims have risen three of the last four weeks. but overall they remain at levels consistent with steady job creation. >> meantime, a closely watched measure of manufacturing in the mid-atlantic states is the weakest it's been now in three years. the new survey from the philadelphia federal reserve shows that manufacturing was lower in january though at a slower pace than anticipated. however, a measure of future expectations for the sector. this is the one that people really paid attention to. took a worrisome turn for the worse. energy companies cutting orders for new equipment. that depresses manufacturing activity. low oil and low commodity prices in general have hit the rails quite hard. cargo volumes have dropped and things aren't looking much
better heading into the new year. more evidence of that came today when union pacific reported a decline in profit on weak freight volume. morgan brennan reports. >> reporter: 2016 is shaping up to be another tough year for transportation stocks. some experts are even referring to it as a freight recession. including csx chief michael ward, who on a recent earnings call used the term to describe the headwinds pressuring so many of the and csx isn't alone. today union pacific's stock hit its lowest level since february of 2013. after disappointing earnings and downbeat commentary. after a, quote, very challenging 2015, that railroad is not releasing earnings guidance for this year, due town certainty in its market. >> our perspective is with the strong dollar and with the energy recession in full bloom there are some pretty significant headwinds to our volumes right now. >> union pacific ceo adding that many businesses tied to consumers have been weaker than expected as well.
despite the windfall consumers have enjoyed from lower energy prices. that dynamic is emerging in other industries too. just earlier this week the american trucking association said truck freight volumes should be negatively impacted over the coming months because businesses are overrun with inventories and buying less, which means less shipping. analysts say that's worrisome since companies catering to consumer goods have been holding up better than those hauling industrial products and raw materials. >> the concern we have and the bigger picture issue we've highlighted recently is that in the fourth quarter we started to see some weakness in some of the consumer-facing end markets. if we were to see some of that industrial and commodity weakness spill over into the consumer end market that would look more like a mild, total u.s. economic recession. so there's something we're watching very closely. >> still the hope is that overall freight demand begins to stabilize and recover later this year. but in the meantime it's a story of weakening financials, plunging stock price, and in the case of railroads growing staff
cuts. for "nightly business report" i'm morgan brennan. so while some areas of the economy are suffering because of low oil prices, others of course benefiting. and at the world economic forum in davos, switzerland some world and business leaders focused on the positives. >> oil prices have gone up and down many times in my lifetime. this is the first time that i've heard lower oil prices described only as a bad thing. and i think you have to be careful because both sides of the oil price equation, you look at the economic growth in europe, even economic growth in the united states where in spite of head winds internationally we're maintaining steady good growth, good consumer demand, lower oil prices are part of the reason for that. >> i don't believe the sell-off for oil is really reflective of an economic slowdown. in fact, if you look at the fourth quarter year over year demand for oil, it was up 1.1%. so we're not seeing a demand slowdown in oil. what we're seeing is a massive oversupply of oil.
>> it helps, particularly in a place like the united states, it helps the consumer. mobility goes up. the amount of travel goes up. that helps our business. and we've seen that in the last sort of six months or so. >> and airlines of course have been saving billions of dollars thanks to lower oil and fuel costs. and that has certainly helped earnings. today southwest, united, and alaska air all reported a rise in profits. but low fuel costs have not necessarily helped their stock prices. phil lebeau explains why. >> reporter: let's be clear. lower jet fuel prices helped airlines rack up record profits last year, and demand remains strong. in fact, southwest filled a record percentage of seats on its planes in the fourth quarter. >> overall i'd give a big thumbs up to the health of the air travel industry here in the u.s. >> so why are airline stocks not soaring? one factor is airfares, which are falling, partially because
airlines are adding more flights and more seats on the lower end. that's in response to growing competition from low-cost carriers like spirit. so airlines like united are seeing lower passenger revenue for every seat mile available. and that's what wall street doesn't like. the encouraging news is that airlines expect passenger revenue per available seat mile to improve later this year. on united's earnings call ceo oscar munoz, who has been on leave following a heart attack and heart transplant, talked about boosting his airline's bottom line. >> over the long term we certainly believe our relative earnings profile will improve and when and how and all that, that's the work i've got to get done over the next few months. >> reporter: in the meantime airlines will continue enjoying the benefits of paying less for jet fuel. phil lebeau, "nightly business report," chicago. united today also said that it is shifting flights from its houston hub because it's seeing a drop in travel from energy
industry business flyers. still ahead, feeding growth. the new surprising driver of downtown reaes ♪ ♪ stock buybacks are one of the ways companies return capital to shareholders. and last year buybacks hit record highs. they also helped support stock prices by reducing the number of outstanding shares. but as mike santoli tells us, there's some evidence that the buyback trend may have peaked. >> reporter: companies have been by far the biggest, most reliable buyers of stocks since the bull market began in 2009. corporate share buybacks have totaled nearly $500 billion a year since 2013.
and companies have authorized another half trillion dollars of future repurchases. yet these purchases don't happen automatically. january is typically the slowest month for buybacks. only 3% of annual e. purchase volume since 2007 has occurred in the first month of the year since goldman sachs. this could be a reason this market has had little support as it sold off the past two weeks. and perhaps it's a reason we've had three weak januarys in a row. while plenty of buybacks could hit the market once companies report earnings as the month goes on, it's not clear that big companies will be as aggressive with buyback plans in the current environment. earnings growth has stalled and the debt markets for many companies borrowed with finance buybacks have grown for stingy. in the latest 12 months some 130 companies in the s&p 500 spent more on buybacks than they earned in net income. note too that the shares of the heaviest stock repurchasers have begun to underperform the broad market. exchange traded funds attract companies with big consistent buyback program have lagged the
s&p 500 by five percentage points or so over the past six months. so it could be the companies that were happy to do buybacks at higher prices will be less eager to do so even though their shares have become cheaper in the market's setback. for "nightly business report" this is mike santoli at the new york stock exchange. the nation's top wireless provider tops wall street targets, and that's where we begin tonight's market focus. verizon beat the street on both earnings and revenue for the fourth quarter as heavy promotions helped offset holiday discounts from its-lz. the company also saw subscriber growth for its fios tv and broadband services. shares of verizon rose 3% to 45.87. fellow dow component travelers beat targets on an adjusted basis but the insurance company saw its quarterly profit fall more than 16%. revenue was slightly below estimates on weaker financial markets but the company did report a record profit for the full year. travelers fell about a percent to 102.70. british publisher pearson
will cut 10% of its workforce, or about 4,000 jobs, as it continues to trim costs. the maker of education products has been slimming its operations in recent months including selling its stake in "the economist" magazine as well as the "financial times." shares of pearson jumped 16% on that news to $1.95. $10.95. general motors branching out into the on-demand car world. this time the auto maker launching a car sharing service called maven. the service will start in ann arbor, michigan. it's not the first time they dabbled in this market. earlier this month the company invested in the ride share firm lyft. it also bought the assets of side car which just shut down last month. gm was up a fraction today to 29.55. how about a cup of coffee? even starbucks it seems is subject to slower growth in china. starbucks posted an earnings beat but said sales in its china and asia pacific divisions were up only 5%. that's less than the 6.1% growth
that analysts figured on. starbucks lowered forecasts for the current quarter by about a penny. and starbucks shares rose nearly 4% to 59.03 today. but when the earnings came out after the bell, you see the red? that's where the shares gave all of those gains back and then some. and schlumberger announced it will spend $10 billion to buy back shares of its stock. also posted a fourth quarter earnings beat two cents north of estimates. revenues in line with expectations even though they did fall 9% from the year ago period. schlumberger shares up 39 cents on the day to $61.45. they initially moved up even more in after-hours trading. the global turmoil has been good for mortgage rates as investors look for safe haven instruments. they've been buying up treasuries, which pushes the yield lower. according to freddie mac the 30-year fixed rate average fell for the third week in a row to 3.81%. the 15-year is at 3.1%. while low mortgage rates may be good for the residential housing market, there's another
trend that's driving commercial real estate and downtown development. restaurants. and as diana olick reports from cleveland, eateries and cafes are now feeding a lot of growth. >> reporter: on a frigid wednesday afternoon at cleveland's l'albatross brasserie chef zack bruel's kitchen is heating up and the fireside tables are filling with foodies. >> what changed in cleveland is people slowly started moving back into the city. that's what really changed. now, were restaurants part of that? definitely. >> reporter: restaurants and their celebrity chefs are driving growth in mid-size seize across america, fueling jobs and pushing commercial property prices. >> i'm going to transform a neighborhood or help transform a neighborhood. i'm part of that. the developers or the landlords come to me. >> reporter: bruel owns ten
restaurants in cleveland spanning ethnic tastes and catering to a new class of clevelanders. restaurants may be the new retail when it comes to urban growth but there's an equally powerful driver, millennials. returning to smaller cities like this one in search of cheaper housing and steady jobs. >> i think the millennials with the money that they have in discretionary spending, they are simple. they're not buying as many retail goods, but they're always up for a good night out. and i think the discretionary money is going to fine food. >> reporter: neighborhoods are now becoming experience districts, where people work, live, and play in a growing number of bars and restaurants. >> the restaurant as the anchor is really defining the center of that urban experience. and the chefs are coming right along with it. you're seeing now chefs as investor owners in their own real estate and you're seeing them really being this sort of marquee entertainment in their own entertainment district. >> it's always been a very sophisticated town, and it still
is. it just is the u.s.'s best-kept secret. >> reporter: and its most delicious. for "nightly business report" i'm diana olick in cleveland. >> and to read more about how restaurants fuel urban development head to our website, nbr.com. coming up, performance art. literally. meet the artist who trades stocks and is using the recent market machinations as her medium. ♪ ♪ when you invest in a stock of course you track its performance. now one artist is using her investments to generate art. you might call it performance art. robert frank introduces us to
the woman who's transforming her studio into a kind of stock exchange. >> reporter: for investors the stock charts of the past two weeks have been painful to look at. but for artist sarah mayojas they are a thinking of beauty. a 24-year-old rising star of the art world, she's taken over a manhattan gallery for an unusual performance piece. trading stocks and turning their movements into paintings. it's a comment on what really drives stocks and how stocks drive our economy and culture. >> the financial markets have just grown in size and importance over the last 25 years in such a phenomenal almost sublime way. that i'm just responding to the world. >> reporter: mayojas used her own money to buy a dozen small thinly traded stocks, move their price, and then paint the trade on canvas. she picks stocks based largely on their quirky names.
like paradise inc. or pope resources rather than fundamental analysis. >> the broker called me up and told me i was the only person on paradise. and that, you know, if i was sure what i was doing. which i was. >> reporter: yet her experiment came at a dramatic moment in the market. when sarah and the gallery planned this project several months ago, she had no idea she would be painting one of the worst market downturns in recent history. on her first day of trading on january 8th the market fell nearly 200 points and fell another 600 during the rest of her performance. the falling market didn't directly affect her trades, but it reminded mayojas, who has an economics degree at wharton and interned at hedge funds, just how volatile and emotional stock values can be. >> when fundamentals don't explain what's going on you are
forced to acknowledge the power sentiment. like how is it that people think one thing on a monday and think something totally radically different on a thursday when nothing enormous has actually happened. >> reporter: she lost tens of thousands of dollars on her trades. and many may wonder whether a black line on a white canvas is really art. >> i think it's fantastic. because it looks to me like the forces of the market and the economy are essentially making paintings. >> reporter: she's already sold most of them. priced at $10,000 each. so now these portraits of a market crash will hang on some very expensive walls. >> i'm happy that they're selling and that they're entering in people's homes. it's essentially all markets are linked. and here this is somewhat this like physical link between a financial market and then now the art market. >> reporter: for "nightly business report" robert frank, ne.
>> i like pope resources. that kind of spoke to me. before we go here's another look at the day on wall street. let's see how she would have drawn that. dow up nearly 116 points. nasdaq a fractional gain. the s&p 500 added 9. and that does it for us tonight on "nightly business report." i'm sue herera. thanks for watching. >> and thanks from me as well. i'm tyler mathisen. have a great evening, everybody. we'll see you tomorrow. get ready for a winter storm in the east. >> i know. ♪ ♪
[sofaya] and talking to really cool people [ben] who have really connected their passion to their career today is the last day of the trip, it doesn't feel like the last day of the trip [tina roth] i was always waiting for that you know perfect moment angelic choir coming down saying tina you should start your own business now and that never comes [gary] i really wanted to make a film of my own. i hadn't directed a film at that point. that was the first time i had picked up a camera. [martha] i could keep doing this for another couple of months [male narrator #1] road trip nation is sponsored by, autodesk, providing software and resources for tomorrow's designers and engineers to solve today's challenges hobsons, providing solutions to educational institutions that help students move successfully through each stage of the learning life cycle. [female narrator #2] roadtrip nation would like to thank the college board for supporting this series.